I cannot tell you how many times people have told me this LTC insurance is too expensive. This is typically followed an hour later by “Wow, I can’t believe that’s all it costs”. Perhaps agents are explaining things incorrectly.
Let’s take a 50 year old couple who wisely choose to investigate this coverage while they are still healthy enough to qualify. They choose modest coverage, enough that with their available income they can pay for home care and assisted living type facilities, where 80% of all LTC is done.
The coverage gives them 10 years of care, when needed, and the daily benefit of $100/day increases automatically at 5% compound each year. This feature is absolutely essential due to the quickly rising costs of LTC. The NYTimes reported recently that by 2020 professional caregiving will overtake retail as the number one occupation in the USA. Where will those workers come from and who will pay their wages?
We determine an annual premium of less than $3000 a year to cove the both of them and the automatic annual 5% benefit increases. Over 30 years they will have paid considerably less than $90,000 of tax-deductible premiums.
By that time, at age 80, they will have $4,000,000 dollars for LTC costs between the two of them! If they had instead put those dollars in a stock market account earning 10% interest every year (wouldn’t that be wonderful), with no losses ever, they would have less than $600,000 by then. They would have had to earn a consistent and unrealistic nearly 20% every year to do as well.
Lets compare this to an auto insurance policy. If you never have an accident, it’s a big waste of money. You’re a good drive, cancel that policy! Instead, take the premiums and put them in the bank earning (today’s current rate of) 1% interest. In 30 years, you might have enough for a fender bender, assuming nobody gets hurt. Who would do that?
Back to my original example: If the couple were 60 years old instead of 50, and still healthy enough to qualify for coverage (25% are not by age 60) they would pay twice as much in premiums to have that same $4,000,000 in coverage in 30 years.
At a recent discussion at Wisconsin’s HHS offices, the following statement stuck in my memory. “In 12 years we will look back on 2014 as the ‘good old days’ of long-term-care. We have the facilities, and we have the staff, but in 12 more years as the 10,000 baby boomers turning 65 every day start hitting 80, we won’t have the people or the facilities to handle them”.
Recently, I was approached by two home care agencies in Green Bay, WI. Each one asked if I would inquire of my clients if anyone would be willing to work just 2 mornings or afternoons a week as a caregiver. They indicated they were turning away clients today as they cannot hire enough caregivers now.
Is it time for you to investigate LTC insurance? Perhaps, or perhaps not. But investigate with a professional who understands all the things that need to be taken into account to come up with an appropriate solution. More info can be found at www.TheLongTermCareGuy.com